AM Best has downgraded the Financial Strength Rating to C++ (Marginal) from B (Fair) and the Long-Term Issuer Credit Ratings to “b+” (Marginal) from “bb” (Fair) of Blue Cross and Blue Shield of Vermont (BCBSVT) and its subsidiary, The Vermont Health Plan, LLC, collectively known as Blue Cross and Blue Shield of VT Group (BCBSVT Group). In addition, AM Best has maintained the under review with negative implication status for these Credit Ratings (ratings).

The ratings reflect BCBSVT Group’s balance sheet strength, which AM Best assesses as weak, as well as its marginal operating performance, limited business profile and marginal enterprise risk management.

The rating downgrades are attributed to a significant decline in the level of risk-adjusted capitalization and the group’s limited business profile. The risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), through the third quarter of 2024, has deteriorated to the very weak assessment. The decline through the third quarter is being driven by a higher-than-projected net loss due mainly to continued elevated medical and pharmacy claims costs and worsening utilization trends that drove increased underwriting and net losses. This follows a significant decline in capital at year-end 2023 and second-quarter 2024, which resulted in BCBSVT being placed under a capital restoration plan by Vermont’s Department of Financial Regulation in July 2024. Additionally, BCBSVT continues to evaluate potential options for capital support to bolster its risk-adjusted capital and has taken significant rate action for 2025 as part of its corrective action plan.

The limited business profile reflects the challenging regulatory environment in Vermont, with the Department of Financial Regulation overseeing regulatory capital while the Vermont Green Mountain Care Board has oversight on rate increases. The objectives of the two regulatory authorities have a history of not being aligned, which has hindered BCBSVT Group’s ability to obtain requested rate increases. BCBSVT Group maintains a large market share in Vermont where a large majority of businesses are small in scale and maintains a large presence in the ACA marketplace. However, the group faces limited competition in these markets due to few companies participating.

The under review with negative implications status on BCBSVT Group’s ratings reflects AM Best’s concerns that underwriting and net losses in the fourth quarter of 2024 could worsen and further erode absolute and risk-adjusted capitalization. The ratings will remain under review while AM Best has further discussions with BCBSVT management and monitors the status of the organization’s balance sheet strength and operating performance for full-year 2024 and as it implements corrective measures for 2025.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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